Getting to Denmark?

Posted on by

A commenter wrote,

In Denmark you get your free day care so you can become a 2 income family, double income outs you very quickly into the top marginal tax rate of around 60%. Average income tax rates are 45% there, plus a non deductible 25% VAT, plus a 45% top marginal rate for capital gains in case you were trying to save for retirement, plus a 1-3% land tax.

Are these taxes creating ‘equality’? Nope, Denmark has a widening gap in wealth and income, they have started from a very narrow distribution, but have steadily worked to hollow out the middle class. It makes no sense to earn in the middle of their income distribution, you either need to drop into the range where you receive net benefits or jump way into the top of the income range to afford what amounts to top rates of 70-80%.

I have suggested that in the U.S. we have done this also. A household below the median income pays payroll taxes, sales taxes, and possibly property taxes. It loses benefits at a steep rate, and when you factor that in it faces a high tax rate. This impedes upward mobility, as I argued in my essay on the Universal Basic Income.

Null Hypothesis watch

Posted on by

James W. Banks, Leandro S. Carvalho, and Francisco Perez-Arce write,

This article studies the causal effect of education on decision-making. In 1972 England raised its minimum school-leaving age from 15 to 16 for students born after September 1, 1957. An online survey was conducted with 2,700 individuals born in a 36-month window on either side of this date. Participants made 25 incentivized risk choices that allow us to measure multiple dimensions of decision-making. Despite the policy having effects on education, educational qualifications, and income, we find no effects of the policy on decision-making or decision-making quality.

Thanks to a reader for the pointer. This sounds like a win for both the Null Hypothesis and Bryan Caplan’s signaling story.

Tomorrow belongs to whom?

Posted on by

A lot of people I know like to express symmetrical fears about the political environment. They fear both Trump and the young Democratic radicals. Jews complain about anti-semitism on the left and on the right. Etc.

My fears tend to be more asymmetric. One reason relates to this song from Cabaret. Listen to it if you don’t know what I’m talking about.

Ten years from now, what will the battlefield look like? My thoughts:

1. Hundreds of thousands of Trump soldiers will be dead, of old age or opiates.

2. Hundreds of thousands of new college graduates will have been schooled in leftist doctrine.

Regardless of whether symmetric fears are justified at the moment, I think that for the next ten to fifteen years, the most important threats will come from the left.

But my sense is that a relatively small proportion of the most extreme leftists want to have children. That gives me hope for the longer term.

Martin Gurri watch

Posted on by

Who said this?

Most politicians do not have excellent social media skills, but many will try to get noticed and have an impact (or at least hire staff members who will). As more politicians up their game on social media, more of these attempts will hit home. Ocasio-Cortez will have competition. The influence and reach of political celebrities will grow stronger, and the parties will become weaker yet.

This may be a more important trend than what is sometimes called political polarization. But what does this new, more intense celebrity culture mean for actual outcomes? The more power and influence that individual communicators wield over public opinion, the harder it will be for a sitting president to get things done. (The best option, see above, will be to make your case and engage your adversaries on social media.) The harder it will be for an aspirant party to put forward a coherent, predictable and actionable political program.

Actually, it was Tyler Cowen, but it echoes The Revolt of the Public.

But Tyler reaches this important, sobering conclusion:

Finally, the issues that are easier to express on social media will become the more important ones. Technocratic dreams will fade, and fiery rhetoric and identity politics will rule the day.

Tyler Cowen and Jordan Peterson

Posted on by

Peterson says,

Many of you are probably familiar with Jonathan Haidt and Greg Lukianoff’s book, The Coddling of the American Mind. One of the points that they make, which shouldn’t have been up to them to make, was that if you set out to design a conceptual system to make weak and timid people who can’t operate in the world, you couldn’t do a better job than to create what constitutes the safe-space culture that currently permeates university campuses.

But I think he is on a much better track than Haidt and Lukianoff. For he says,

generally speaking, if you want to improve something, rather than criticize and change what already exists, it’s easier, especially now, it’s easier just to build a parallel system and see if you can put something in that’s a competitor.

And there is this:

I would say if you want to become a good educator, which perhaps might mean that you were following in my footsteps, for better or worse, is like, well, you have to learn to read, and you have to learn to think critically, and you have to learn to write, and then you have to learn to speak. You have to get good at all those things. And they’re all worth getting good at. They’re unbelievably powerful skills.

At best, I only accomplished three out of four. When speaking, I can be OK in Q&A format, but otherwise I am insufficiently animated. It is hard for me to stay awake during someone’s monologue, especially my own.

I strongly recommend the entire interview. I came away from the transcript convinced that Peterson has accumulated a great deal of wisdom. You can criticize him on any given point, just as you can criticize a championship baseball manager for taking out a pitcher and having the next guy give up a home run. Even the best managers make mistakes sometimes, but that does not make you better qualified to be the manager.

Speaking as an economist. . .

Posted on by

Suresh Haidu, Dani Rodrik, and Gabriel Zucman write,

Neoliberalism — or market fundamentalism, market fetishism, etc. — is a perversion of mainstream economics, rather than an application thereof. And contemporary economics research is rife with new ideas for creating a more inclusive society. But it is up to us economists to convince their audience about the merits of these claims.

Pointer from Tyler Cowen. The authors are launching a project called “Econoimsts for Inclusive Prosperity.”

1. The use of neoliberalism as a boo-word puts me off right away. I see it as a sign that this will be an exercise in government fundamentalism,, government fetishism, etc. When they are uncharitable to those of us who say “Markets fail. Use markets,” it becomes really hard for me to be charitable to them.

2. Anat Admati has an essay in which she advocates higher capital requirements for banks and opposes tax policy that encourages debt finance rather than equity finance. It is a reasonable case. But I recommend my essay on the book that she co-authored, in which I suggest that the households who ultimately supply the funds for banks might prefer less equity and more deposit-like liabilities than what the book proposes. That essay is a Kling Klassic on capital structure.

3. Atif Mian has an essay that suggests that the extravagant wealth of some people leads to an excess supply in the capital market. Less-wealthy people are lured by low interest rates and weak credit screening into borrowing too much, making the financial system unstable. His solution is to have government confiscate more from the wealthy and redistribute it to the less-wealthy. I think that there is only a low probability that he has correctly diagnosed a problem. Even if he has, I imagine that one can come up with much better solutions.

4. Those are the two essays about which I can be the most charitable.

5. My main point is that I am becoming quite allergic to phrases like “economists say” or “economics says.” I know that I used to employ such phrases, but I have done so only sparingly, and from now on I plan to avoid them completely. Don’t argue from authority. Just state your proposition and defend it. Along these lines, I have had a strict personal policy for many years of not signing petitions of the form “economists who favor X” or “economists opposed to Y.” I dislike the implied tone of “I have credentials, you must listen to me.” I would sign a petition in favor of refraining from ever using the phrase “Speaking as an economist. . .”

How the Scandinavians encourage work

Posted on by

Timothy Taylor writes,

But Kleven also points out that the higher Scandinavian taxes finance government policies that make it easier for many people to work — in particular “provision of child care, preschool, and elderly care.” He writes: “Even though these programs are typically universal (and therefore available to both working and nonworking families), they effectively subsidize labor supply by lowering the prices of goods that are complementary to working. … [T]he Scandinavian countries … spend more on such [labor] participation subsidies … than any other country. …”

I like the phrase “complementary to working.” Obviously, getting transfer payments is a substitute for working. But getting support for child care and elder care is complementary to working.

On hiatus

Posted on by

Until February 19. I am away from my computer, and I keep messing up HTML.

Also, there is nothing to write about. Covington? Northam? If we have the luxury of turning these stories into headlines, then we are either doing very well as a country or else we are desparate for distractions from whatever real problems we have.

A few days ago Tyler Cowen recommended a book called Whiteshift, which claims that the cultural disruption we are experiencing is due to whites feeling threatened demographically. I probably should examine the book. Off hand, though, I think that Martin Gurri has a better explanation, because I don’t think Whiteshift can explain the Arab Spring or Greece or Spain. Gurri’s story is that elites are getting knocked off their perch in the age of the Internet.

In the U.S., I see a progressive elite that pounds the table insisting that it stands against oppression. And we have a conservative elite that pounds the table insisting that it stands against barbarism.

The 2016 election exposed the conservative elite as a slim minority.

The progressive elite is larger, but it is still just a minority. I think it is in a precarious position. Puritanism always provokes a backlash. And just as the Republican base decided that the conservative elite is not worth supporting, might non-white ethnics at some point decide that the progressive elite is not worth supporting? One can envision a scenario in which the progressive elite finds itself as beached as the conservative elite finds itself today.

Kling on Robert Plomin

Posted on by

My review says,

Plomin is optimistic that with larger sample sizes better polygenic scores will be found, but I am skeptical. Unless there are unexplored areas in the existing data sets, such as non-linearities or interaction effects, my guess is that there are diminishing returns to enlarging the sample size.

Politics is about group status

Posted on by

Michael Huemer writes,

Hypothesis: We don’t much care about the good of society. Refinement: Love of the social good is not the main motivation for (i) political action, and (ii) political discourse. We don’t talk about what’s good for society because we want to help our fellow humans. We talk about society because we want to align ourselves with a chosen group, to signal that alignment to others, and to tell a story about who we are. There are AIDS activists because there are people who want to express sympathy for gays, to align themselves against conservatives, and thereby to express “who they are”. There are no nephritis activists, because there’s no salient group you align yourself with (kidney disease sufferers?) by advocating for nephritis research, there’s no group you thereby align yourself against, and you don’t tell any story about what kind of person you are.

He looks at causes of death compared with those that have political salience.